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It seems Jack created 2 $90,000 notes. One for the seller with the Houston house and one for Ed. I understand a zero interest, zero payment note secured by a first mortgage Deed of Trust on Ed’s house. But I am confused how 2 notes can be created and both be secured in first lien position. Brilliant strategy but that one detail has me confused. :confused:
If Ed sold his house and got $90,000 in cash, he would be able to go shopping for a house to buy. but he could not sell his house for cash. Instead, he sold his house to Jack for $90,000 in the form of a note with 0% and 0 payments until the house is sold. ( not sure if there was a time limit on it or not)
Then Jack helped Ed find someone else who had $90,000 in equity who would take a note for their equity. The houston sellers took the note for their equity. And ed bought their house subject to the mortgage which has a $365 a month payment.
What’s in it for houston sellers? They don’t have to make $365 a month payment anymore and they got their equity in the form of a note – better than not at all and continuing to pay the $365 a month on a vacant house.
What’s in it for Ed? he was able to use the $90,000 in equity in his house to acquire another house closer to work… the note was faster than waiting for a cash buyer.
What’s in it for Jack? He gets to collect 100% of the cash flow on a $90,000 house until it sells plus he will be able to possibly sell for a profit. If he gets $600 a month in cash flow, that’s $7200 a year!
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